From: OVERSEAS BUSINESS REPORTS (JAPAN)
University of Missouri-St. Louis
Match 19 DB Rec# - 29,018 Dataset-MARKET
Source : USDOC, International Trade Administration
Source key :IT
Program key :IT MARKET
Program :Market Research Reports
Update sched. :Monthly
ID number :IT MARKET 111108146
Title :JAPAN - DESTINATION JAPAN - OBR911200
Data type :TEXT
End year :1992
Date of record:09/15/1992
Keywords 1 :
| 9112
| CC588
| ECONOMY
| FINANCE
| INVESTMENT
| JAPAN
| MARKET|ASSESSMENT
| OBR
| OBR9112
| ZEC
Country :
| JAPAN
| ASIA
| EAP
| EAST ASIA
| EAST ASIA & PACIFIC
| EAST ASIAN COUNTRIES
| EAST ASIAN GROUP
| FAR EAST
| FAR EASTERN COUNTRIES
| FAR EASTERN GROUP
| OECD
| ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT
| ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMET
| PACIFIC
| PACIFIC RIM
| PACIFIC RIM COUNTRIES
| PACIFIC RIM GROUP
Text :
JAPAN - DESTINATION JAPAN - OBR911200
SUMMARY
Date: December 1991
Source: International Trade Administration, U.S. Dept. of Commerce
Country: Japan
Number of pages: 76
Subject: The report, titled "Destination Japan: A Business Guide for the
90s", discusses the economic and commercial climate in Japan, with emphasis
on information useful for potential U.S. sellers and investors. It includes
all information contained in Overseas Business Reports but is written in a
somewhat more direct style. The report consists of the following sections:
JAPAN COUNTRY FACT SHEET
FOREIGN TRADE OUTLOOK -- ECONOMIC OVERVIEW
THE JAPANESE ECONOMY
WHY EXPORT TO JAPAN?
YES, THERE ARE DIFFICULTIES, BUT THEY CAN BE OVERCOME!
MARKETING STRATEGY
BUSINESS CUSTOMS AND PRACTICES
BEST U.S. EXPORT PROSPECTS
JAPANESE GOVERNMENT PROCUREMENT
REGIONAL OUTLOOK OUTSIDE OF THE TOKYO AREA
PROMINENT ECONOMIC ORGANIZATIONS IN JAPAN
JAPANESE TESTING, STANDARDS, AND CERTIFICATION
INTELLECTUAL PROPERTY PROTECTION
EXPORT FINANCING
CUSTOMS CLEARANCE
TAXATION
THE STRUCUURAL IMPEDIMENTS INITIATIVE
FOREIGN TRADE BARRIERS
U.S.-JAPAN TRADE AND INVESTMENT
THE JAPANESE GOVERNMENT
JAPAN IMPORT PROMOTION MEASURES
U.S. DEPARTMENT OF COMMERCE JAPAN EXPORT PROMOTION INITIATIVE
U.S. DEPARTMENT OF COMMERCE SPECIAL INFORMATION PRODUCTS
AND BUSINESS FACILITATION SERVICES FOR JAPAN
WHERE TO RECEIVE EXPORT COUNSELING
WHERE TO GET MARKET INFORMATION AND TRADE LEADS
GUIDANCE FOR BUSINESS TRAVELERS
RELEVANT PUBLICATIONS
ARE YOU READY TO EXPORT?
Destination Japan:
A Business Guide For The 90s
Prepared by
Eric Kennedy
Japan Export Information Center (JEIC)
With Contributions from
Cynthia Campbell, Cantwell Walsh, Edward Leslie,
Paul Judge, and Michelle Plante of the JEIC;
the U.S. & Foreign Commercial Service, Japan;
and the U.S. Patent and Trademark Office
U.S. DEPARTMENT OF COMMERCE
International Trade Administration
December 1991
TABLE OF CONTENTS
JAPAN COUNTRY FACT SHEET
FOREIGN TRADE OUTLOOK -- ECONOMIC OVERVIEW
THE JAPANESE ECONOMY
WHY EXPORT TO JAPAN?
YES, THERE ARE DIFFICULTIES, BUT THEY CAN BE OVERCOME!
MARKETING STRATEGY
Distribution and Sales Channels
Introducing Your Product to the Japanese Market
Choosing a Business Partner in Japan
Which is the Best Entry Mechanism for Your Company?
More Advanced Market Entry Alternatives
Establishing an Office in Japan
Licensing
Franchising
Direct Marketing
Pricing
Advertising
The Japanese Consumer
How to Please the Japanese Consumer
BUSINESS CUSTOMS AND PRACTICES
BEST U.S. EXPORT PROSPECTS
JAPANESE GOVERNMENT PROCUREMENT
REGIONAL OUTLOOK OUTSIDE OF THE TOKYO AREA
PROMINENT ECONOMIC ORGANIZATIONS IN JAPAN
The American Chamber of Commerce in Japan
Keidanren
Keizai Doyu Kai
JAPANESE TESTING, STANDARDS, AND CERTIFICATION
INTELLECTUAL PROPERTY PROTECTION
EXPORT FINANCING
Export-Import Bank of the United States
Foreign Credit Insurance Association
Small Business Administration
Overseas Private Investment Corporation
U.S. Department of Agriculture
Japanese Entities
CUSTOMS CLEARANCE
TAXATION
THE STRUCUURAL IMPEDIMENTS INITIATIVE
FOREIGN TRADE BARRIERS
U.S.-JAPAN TRADE AND INVESTMENT
THE JAPANESE GOVERNMENT
JAPAN IMPORT PROMOTION MEASURES
U.S. DEPARTMENT OF COMMERCE JAPAN EXPORT PROMOTION INITIATIVE
U.S. DEPARTMENT OF COMMERCE SPECIAL INFORMATION PRODUCTS
AND BUSINESS FACILITATION SERVICES FOR JAPAN
WHERE TO RECEIVE EXPORT COUNSELING
WHERE TO GET MARKET INFORMATION AND TRADE LEADS
GUIDANCE FOR BUSINESS TRAVELERS
RELEVANT PUBLICATIONS
ARE YOU READY TO EXPORT?
JAPAN COUNTRY FACT SHEET
PROFILE:
A. Population: 123.61 million
B. Religions: Shintoism, Buddhism, Christianity 1 percent
C. Government: Type: Parliamentary Democracy
Head of Government: Prime Minister Kiichi Miyazawa
D. Language: Japanese
ECONOMY: 1988 1989 1990
A. GNP ($B, Nominal) 2,916 2,890 2,964
B. GNP Growth Rate (real, 1985 base) 6.2 4.7 5.6
C. GNP per capita (in dollars) 23,750 23,448 23,971
D. Gov't spending as a percent of GNP 15.8 15.6 15.4
E. Inflation (CPI, 1985 base, percent) 0.7 2.3 3.1
F. Unemployment (percent) 2.5 2.3 2.1
G. Foreign Exchange Reserves ($B) 97.7 84.9 77.1
H. Average Exchange Rate ($1=) 128.15 137.96 144.79
I. U.S. Economic Assistance 0 0 0
J. Output/hour manufacturing (1985=100) 90.7 92.8 94.6
K. Domestic Demand (percent growth) 7.6 5.9 5.8
L. Household Savings Rate (percent) 14.3 14.1 13.8
TRADE:
A. Total Japanese Exports ($M) 265,917 275,175 286,948
B. Total Japanese Imports ($M) 187,354 210,847 234,799
C. Total U.S. Exports (FAS value, $M) 322,426 363,812 393,893
D. Total U.S. Imports (customs val. $M) 440,952 473,211 494,903
E. U.S. Exports to Japan (FAS, $M) 37,725 44,494 48,585
F. U.S. Imports fm Jpn (customs val. $M) 89,519 93,553 89,655
Principal U.S. Exports: automatic data processing machines and office
equipment; wood, in the rough or roughly squared; aircraft, spacecraft,
and associated equipment; seafood products; semiconductors and other
electronic components
Principal U.S. Imports: motor cars and other motor vehicles, automatic
data processing machines and office equipment, parts and accessories of
motor vehicles, scientific optical equipment, and semiconductors and
other electronic components
Best U.S. Export Prospects: Pharmaceuticals, telecommunication
services, marine fishery products, biotechnology products, medical
equipment and supplies, industrial chemicals, aircraft and parts,
architectural/engineering/construction services, sporting goods,
computer software and services, and building products.
Foreign Supplier Share of Japanese Imports in 1990:
1. S.E. Asia: 23.3% 4. Middle East: 13.2%
2. U.S.: 22.4% 5. Indonesia: 5.4%
3. E.C.: 14.9% 6. Australia: 5.3%
BOP Current Account Balance: 1989: $57.16 billion
1990: $35.79 billion
Trade Balances with Leading Partners, 1990 ($B):
1. U.S.: 41.07
2. S.E. Asia:28.12
3. E.C. (including the Federal Republic of Germany): 18.49
4. Federal Republic of Germany: 6.30
5. Republic of Korea: 5.75
6. Middle East: -21.46
IMPORT POLICY:
1. Tariffs: The average Japanese tariff is low, but on specific items,
particularly foodstuffs and leather goods, both tariffs and quotas are
trade restrictive. Japan has recently eliminated the import quotas on
beef and citrus, as well as the quotas on many processed foods.
2. Taxes: Since April 1, 1989, the commodity tax has been replaced with a
general consumption tax of 3 percent, 6 percent on autos, which is
levied on the c.i.f. plus duty value.
3. Licensing of Technology: Until recently, a report had to be filed with
the Ministry of Finance and other competent ministries through the Bank
of Japan before signing a licensing contract. In practice, the investor
was notified that the Japanese Government had no objection within one
hour following notification, if the proposed investment was in
unrestricted industries. However, as part of the U.S.-Japan Structural
Impediments Initiative Agreement, this prior notification requirement
has been replaced by ex post facto notification for investment in
unrestricted sectors. More stringent regulations apply to "designated
technologies" which have been determined to have significant influence
on the security of the nation and the national economy.
INVESTMENT:
Foreign Ownership Restrictions: A 100 percent foreign capital is
allowed in principle except for the following sectors: broadcasting;
telecommunications; electric power generation; domestic rail and air
transportation; arms; gun powder; atomic energy; aircraft; space
development; narcotic manufacturing; vaccine manufacturing; security
guard services; agriculture, forestry, and fisheries; petroleum refining
and marketing; leather and leather product manufacturing; and mining.
Total U.S. Direct Investment in Japan (cumulative): 1988 $16.9 billion,
1989 $18.5 billion, 1990 $20.9 billion.
Principal Foreign Investment Sectors in Japan (1950-1989): Machinery,
chemical, commerce/foreign trade, services, real estate, petroleum,
banking/insurance, and metals.
U.S. Share of Foreign Direct Investment in Japan: 50.5 percent (as of
March 31, 1990)
Principal Foreign Investors in Japan (JFY 1989): United States, the
Netherlands, Federal Republic of Germany, Switzerland, United Kingdom,
and Hong Kong.
Japan's Foreign Direct Investment in U.S. (cumulative): 1988 $53.4
billion, 1989 $67.3 billion, 1990 $83.5 billion.
FOREIGN TRADE OUTLOOK -- ECONOMIC OVERVIEW
The Japanese economy continues to experience success despite the recession
in the United States. Since 1987, Japan has enjoyed strong economic growth,
highlighted by low inflation and unemployment and led by strong domestic
rather than external demand. The real GNP growth rate in 1990 was 5.6
percent. Japanese monetary policy played an important role through 1989 in
sustaining expansion of Japanese domestic demand, while falling import
prices and a measure of deregulation kept inflation at bay. Troubled stocks
and more stringent monetary policy have not yet dampened perceptibly the
strong growth in all components of domestic demand, except housing. Consumer
spending and corporate investment are the mainstays of the current boom.
More and more U.S. companies are realizing that the best way to respond to
Japanese competition at home and in world markets is to become involved in
the Japanese market. Not only is Japan the world's second largest economy
($2.96 trillion) after the United States, it is the largest economy in Asia
and the second largest market for U.S. exports after Canada. Japan has a
highly educated and efficient labor force, a stable government, an economy
driven by high levels of household savings and capital investment, a huge
and growing domestic market, and continuing growth exceeding that of the
United States. Not only are there opportunities for U.S. companies in the
Japanese market, but market entry into Japan should be a vital part of any
company's international marketing strategy.
Over the next several years, Japan will offer many new business
opportunities -- in infrastructure build-up, as the tremendous economic
growth has brought a need for airports, roads, bridges, and housing; in
leisure, as the Japanese worker finds more time and money to spend off the
job; in retirement communities and health care with the "graying" of
Japanese society; in changing and broadening consumer tastes, as the average
Japanese consumer has become more cosmopolitan with greater exposure to
foreign products; and in Japan's large Official Development Assistance (ODA)
projects.
THE JAPANESE ECONOMY
The Japanese economy, rebuilt from post-Second World War ruins, was the
world's second largest economy in 1990. Persistently huge external trade
imbalances have evoked steadily mounting international economic and
political pressures on Japan to adopt policies that accelerate structural
adjustment. Frustrated trading partners point out that Japan is also home
to inefficient transport, agricultural, construction, and distribution
sectors which are sheltered from foreign competition. Transition to greater
competition in these sectors is under way -- too slow to satisfy trading
partners, but remarkably rapid in Japanese eyes.
Imports into Japan are increasing, and the share of imported manufactured
goods has risen from about 20 percent in 1982 to about 48 percent in 1990
(SITC categories 5-8). Japanese external balances, after a four-year upward
spiral, declined in yen terms in 1987, and in dollar terms since 1988.
Following Japan's reversal of its easy monetary policy in late 1989, a climb
in interest rates brought capital costs from historic lows to levels more
comparable with those in the United States. Together with a change in
expectations of earnings, the higher interest rates prompted reduced net
capital outflows from Japan. Japanese monetary policy tightening coincided
with two distinct periods of broad equity market depreciation, the first in
the early spring of 1990 and the latter following the Iraqi invasion of
Kuwait in August 1990.
Japan has pursued relatively tight fiscal policies since 1982 to constrain
growth in government debt, which had expanded to about 35 percent of nominal
Gross National Product (GNP) in that year. However, under pressure from
other Group of Seven (G-7) countries to contribute to the reduction of
international imbalances, the Japanese Government in June 1987 initiated a
$35 billion multisector public works spending package and followed up with
tax cuts worth about $10 billion. Building on economic growth which began
late in 1986, the package helped to reduce fiscal drag on the economy. In
the June 1990 report on the U.S.-Japan Structural Impediments Initiative
(SII) Agreement, the Japanese Government agreed to formulate a ten-year plan
to boost social infrastructure spending significantly.
In cooperation with the United States, Japan is playing a leading role in
increasing Official Development Assistance (ODA) flows, and became the
world's largest donor in 1990. Japan has committed to double ODA to at
least $50 billion over the five-year period from 1988 to 1992 and to improve
the quality of that aid by boosting the share of grant and untied aid.
Japan ended most foreign exchange controls in the 1970s, culminating in a
major simplification of the Foreign Exchange and Foreign Trade Control Law
in 1980. Currently, pursuant to the international understanding launched
under the 1985 Plaza Accord and refined since then, Japan actively
coordinates economic policies with the United States and its other G-7
partners. The appreciation of the yen since 1985 has increased the price
competitiveness of American products and is contributing to the reduction of
Japan's enormous external trade imbalances. At this point, although import
price reductions have had some impact in moderating domestic price levels,
there remains room for further improvement in terms of benefits for
consumers. This situation could stimulate additional demand for imports.
WHY EXPORT TO JAPAN?
You have heard about the great market potential in Japan for goods and
services. There are three basic reasons why your firm's products and
services should be in the Japanese market.
First, Japanese consumers, both individual and corporate, are spending in
record amounts. This recent phenomenon is in addition to the high levels of
capital investment and research and development (R&D) outlays of the private
business sector, and continues to fuel Japan's economic growth. Already,
many European and Asian competitors are pursuing this trend and have come to
Japan in force.
Second, there is a massive infrastructure buildup under way in Japan as it
strides into the 21st century. Trillions of dollars are to be spent on
airports, bridges, roads, port development projects, heliports, buildings,
telecommunications systems, resorts, retirement communities, marinas,
conference centers, and medical and science cities. Furthermore, the U.S.
Government has negotiated an agreement with the Japanese Government to
ensure more opportunities for American firms in the Japanese construction
market.
Third, entering the Japanese market should be regarded as an indispensable
part of the global strategy of your business -- and without a global
strategy, it will be very difficult to remain competitive in your domestic
market over the long term. Your firm should be in Japan (1) at a minimum,
to gather information on the Japanese competition and new Japanese
technology; (2) to exploit the growing Japanese market; (3) to compete with
your Japanese competition in Japan, thereby enhancing your competitiveness
and your market share ultimately in the United States; and (4) to establish
relationships with Japanese business and government entities to enable your
company to work in Japanese-financed development projects in third
countries. Japan's Official Development Assistance (ODA) program is now one
of the world's largest providers of U.S. Agency for International
Development (AID)-type grants and loans. Finally, experience gained in
Japan responding to the severe demands of Japanese customers can result in
improvements to your products made and sold throughout the world. The
observation that if a company can sell in Japan, it can sell anywhere, is
basically true.
YES, THERE ARE DIFFICULTIES, BUT THEY CAN BE OVERCOME!
So you have heard about great opportunities in Japan and its necessary role
in your firm's international marketing strategy. You have also been warned
of the great difficulties your firm will face. You have been told that your
goods may be treated unfairly, that you will have to adapt your product to
the Japanese market, and that the distribution system in Japan is too
mysterious and complex. Beyond these problems, you recognize that you will
face impenetrable cultural barriers. However, only some of this is true to a
limited degree, and these perceptions should not deter you from taking
advantage of one of the world's largest and richest markets.
Unquestionably, Japan is a difficult market to crack and, as in most
countries, there are cases of protectionism. Nevertheless, Japan is not the
"closed market" of even a decade ago. There are now very few formal
barriers to trade in the form of quotas and tariffs. For those who have a
quality product and are willing to undertake the high cost of initial market
entry in the world's most expensive country, it is possible to achieve a
substantial market share and to make significant profits. The regulatory
system is still complex, but the Japanese Government has substantially
removed the legal and administrative restrictions on imports and foreign
investment in Japan that traditionally made doing business there difficult
for U.S. businesses. In fact, the Japanese Government has shifted its
position towards encouraging imports and promoting investment. However,
some knotty regulatory barriers and discrimination do still exist. When a
company cannot solve such problems independently or through legal advisers
in Japan, the U.S. Government, and particularly the U.S. Department of
Commerce, can often provide assistance. U.S. companies should not be afraid
of retaliation by the Japanese bureaucracy for seeking fairness and
transparency in Japanese administrative regulations. There are
difficulties, but upon closer inspection, they are not as formidable as they
first appear. With a little hard work, they can usually be overcome. Many
U.S. firms now realize that they can no longer afford not to make a
commitment to the Japanese market. The ultimate benefits of getting
established in one of the world's largest, most advanced, and dynamic
economies, more than repay the initial effort and long-term commitment.
MARKETING STRATEGY
The key to your success in Japan is the commitment of your resources --
including your time, money, and personnel -- to develop a market for the
long term. If you prepare well, exercise patience, and demonstrate
commitment, then you will likely reap substantial benefits from your
efforts. There are six key points that every American firm wishing to do
well in Japan must know, understand, and remember before entering the market:
Product: The acceptance of your product in the Japanese market is based
primarily on its quality and after-sales service, not its price (although
this is still an important consideration). Your product may sell well in
the United States and other countries, but that does not mean it will be
well received in Japan. The Japanese are the most discriminating shoppers
in the world. The Japanese are very quality-conscious. Strict delivery
dates must be met. Customer-oriented service is a decisive factor. The
Japanese consumer looks for innovation in technology, design, style, and
fashion. Both your product and corporate image are critically important.
Preparation: Substantial preparatory homework is required. You must make
an effort to know the market for your product and your potential competition
in that market. You must carefully monitor the activities of Japanese
competitors and Japanese Government regulations and development programs.
Furthermore, you must be ready and willing to modify your product to meet
local marketing requirements. This modification would include metrification
of products, manuals, and sales literature. These steps may be necessary in
order to meet some regulatory condition or simply to conform to the personal
preferences of the Japanese consumer or end-user. Your firm would do no
less when selling in the United States. You should have all relevant
product literature translated into Japanese. This may prove expensive, but
it is necessary.
Presence: In almost every case, you MUST have a presence in the Japanese
market if your firm is to succeed. This can be in the form
of a representative -- an individual or organization that serves as a
middleman representing you and your product, or an actual physical presence
by your firm -- a liaison or branch office, subsidiary, or joint venture.
Whichever option you choose, a presence is absolutely essential. Your firm
needs someone in Japan to advertise your product, take orders, resolve
potential delivery problems or bottlenecks on the Japanese side, work with
distributors, replace defective or broken goods, and implement after-sales
service. You need someone to physically import the product, to arrange
payment, and to keep you informed of what is happening. This last point is
often neglected by exporters. Products come and go in Japan. What is an
advanced product or in fashion today can be outmoded and unfashionable
tomorrow. Your firm must be continuously kept aware of market trends and
product developments in Japan to remain competitive.
Culture: An understanding of the Japanese business mentality and a
willingness to accommodate Japanese consumer preferences are extremely
important. Simply put, learn about Japan -- about its culture, history, and
business practices. One of the most common mistakes American firms make in
Japan is that they do not listen to their people in Japan. It is wise to
listen to your Japanese representative when he or she makes a suggestion.
Your representative is in the best position to know what is going on in
Japan, and therefore, to recommend the best course of action. Demonstrate
prudence, but do not disregard the comments or suggestions made by your
representative in Japan. A lack of responsiveness by you may result in an
arriving shipment not being cleared through customs or poor sales.
Education: Many products from the United States fit into a cultural or an
industrial environment that may not currently exist in Japan. This
uniqueness is what often gives U.S. products the edge. However, you often
must educate your customers about the product's purpose, use, and quality.
Patience: Entering the Japanese market requires a long-term approach;
negotiations are likely to be lengthy, initial costs are high, and returns
may be slow in reaching profitable levels. Do not expect immediate
results. Only by exercising patience will you succeed. A number of firms
have failed in Japan only because they lacked a sustained commitment and
prematurely withdrew from the market.
Distribution and Sales Channels
The Japanese distribution system is very different from our own; it is as
inefficient as it is complex. There are two basic methods of distribution
for potential exporters to Japan. One is to use the existing distribution
channels of a trading company, manufacturer, or wholesaler. The other is to
set up your own distribution system -- which could be very expensive
initially, but more efficient over the long term. The decision as to which
approach to follow must be based on an assessment of product
characteristics, the potential market size, the structure of the market
(buyer universe), the degree of complexity of the existing distribution
channels, and your firm's resources, as well as your willingness and ability
to commit them to the development of the Japanese market.
If the market is one in which there is a large number of smaller end-users
located throughout the country, it may be necessary to rely on a network of
wholesalers. Where the buyer universe is relatively concentrated among a
limited number of large firms, marketing may be direct or through a single
intermediary. A key factor for you is to answer the question, "Who has
control over the channels of distribution which provide access to my
market?" Your firm must understand existing distribution channels in order
to utilize them or develop an innovative approach. To reach your potential
customers, you may have to rely on a trading company or wholesaler who
controls related distribution channels for your product.
Japanese distribution practices are often markedly different from those in
the United States. Multiple layers of middlemen may be involved in a system
of highly institutionalized marketing channels linking producers, retailers,
and end-users. Wholesalers and retailers in Japan significantly outnumber
their counterparts in the United States. Many elements of the distribution
system have fewer than ten employees, cannot provide their own credit or
maintain large inventories, and often have financial, ownership, or
exclusive arrangements with major Japanese manufacturers, industrial groups,
or trading companies. Distribution channels in Japan vary considerably from
industry to industry and product to product with particular differences
between consumer and industrial goods.
In some capital goods sectors, Japan has a number of small firms which
function as subcontractors for larger manufacturers. Small and medium-sized
firms, employing fewer than 300 persons, supply the majority of
manufacturing industries with most of their products. To sell to these
firms, it is often necessary to follow a multilayered distribution system.
You need to determine the identity, locations, and needs of your customers
before choosing the distribution channel. Your representative can be of
tremendous aid in identifying and accessing the proper distribution channel.
Introducing Your Product to the Japanese Market
The first move your company must make before entering the Japanese market is
to determine whether or not there is in fact a market for your product.
Second, you must have a market strategy. The Japanese customer is the most
demanding in the world. Poor quality, inferior packaging, and second-rate
customer service will not be tolerated. In addition, when doing business in
Japan, what is considered unnecessary fluff in most countries is vital for
the success of your company. You are trying to sell more than your product
to the Japanese. Your company's image, reputation, and reliability are
critically important. The Japanese insist on knowing your company's
history, goals, and vision for success. Perception and image are everything
in Japan. The more information they know about you and your company, the
more comfortable they will be in dealing with you. Communication is vital.
Your potential Japanese agent/distributor/representative must be reassured
that you are making a permanent commitment to the Japanese market. If you
have not convinced him or her of your seriousness, your product will receive
minimal consideration.
You should designate a manager who is responsible for Japan operations.
Ideally, the Japan portfolio should be the manager's sole responsibility;
and if not resident in Japan, he or she should visit Japan at least four
times a year. In addition, when selling the product, a company
representative who knows the product should be in Japan to answer specific
technical questions or hold seminars and conferences. Too often, when a
potential Japanese customer asks a technical question about a U.S. product,
the American company's marketing representative cannot answer the question.
Providing an informational brochure in Japanese is a good beginning, but
quite often it is not enough. The inability of your sales representative in
Japan to answer technical questions about the product indicates to your
potential customers a lack of pride in your product. They will take their
business elsewhere.
The Japanese often praise the innovative design, technology, and creativity
of American products. However, many times they are critical of the low
quality of the product or the reluctance of American companies to alter
their product to meet Japanese consumer tastes. Japanese consumers will
carefully examine the stitching of clothing and will notice if the color
fades when washed. If they detect a flaw, they are unlikely to purchase the
product. American companies cannot stand pat in the Japanese market
either. Too often, an American company will have a good product that
captures Japanese interest, but the company does not continue to develop or
modify the product to meet the specific needs of the Japanese consumer.
Meanwhile, Japanese and Asian competitors will take the product, copy it,
and improve it -- offering it at a cheaper price.
The type of product that you are interested in exporting to Japan will
largely dictate the direction you will take. Listed below are a few
suggestions on how to expose your product to the Japanese market. Please
note, and this is of the utmost importance to succeed in Japan, that your
goal here is to introduce yourself to your potential Japanese counterpart --
your partner, if you will. This partner is the organization, company, or
person with whom you, the exporter, will work. Your partner's role in this
arrangement is to introduce and sell your merchandise to the Japanese
consumer or end-user. However, your cooperation, attention to detail, and
involvement are the primary conditions for their success, and yours.
The Agent/Distributor Service: The U.S. Department of Commerce offers the
Agent/Distributor Service (ADS) which is an overseas search to identify
potential representatives for your product in the Japanese market. U.S.
commercial officers in Japan prepare a list identifying up to six Japanese
prospects who have expressed an interest in representing you in the market.
Since the processing time at the U.S. Embassy ranges from 30 to 45 days, you
should allow for sufficient lead time. An additional benefit from this
service is that the U.S. Government is introducing your firm to a potential
Japanese partner. Proper introductions by third parties are an integral
part of doing business in Japan, and many Japanese firms are reluctant to do
business without an appropriate introduction. When filing for the ADS, you
should give as much information as possible about what is unique or
different about your product. Information on your company's function,
history, and goals is equally important. The ADS does not include a search
for a licensee or joint venture partner. Contact your local U.S. Department
of Commerce district office for more information on the ADS.
The Comparison Shopping Service and Market Research: The Comparison
Shopping Service (CSS) is a more comprehensive service for those companies
which are prepared to make a more serious initial commitment to the Japanese
market. The CSS is a custom market research service designed to help firms
such as yours get the precise information you need to assess a given export
market. The CSS can provide key marketing facts about your specific product
which cannot be found in broader industry surveys.
The CSS provides answers to nine key marketing questions about your product
in Japan: (1) Does the product have sales potential in the market? (2) Who
is supplying a comparable product locally? (3) What is the usual sales
channel for getting this type of product into the market? (4) What is the
going price for a comparable product in this market? (5) Are purchasers of
such products primarily influenced by price or other competitive factors,
such as credit, quality, delivery, service, promotion, brand, etc.? (6) What
is the best way to get sales exposure in the market for this type of
product? (7) Are there any impediments to selling this type of product in
this market, such as quotas, duties, or local regulations that might impede
sales? (8) Who might be interested and qualified to represent or purchase
this company's product in the market? and (9) If a licensing or joint
venture strategy seems desirable for this market, who might be an interested
and qualified partner for the U.S. company?
Answers to these questions are obtained from on-the-spot, personal
interviews conducted by private sector market research firms in Japan. The
researchers conduct a CSS survey by interviewing knowledgeable local
sources, such as importers, distributors, end-users, or local producers of
comparable products. The final CSS survey will be completed and sent to you
in approximately 60 days. For further information, contact your nearest
U.S. Department of Commerce district office.
There are many industry subsector analysis reports that have been written by
the U.S. and Foreign Commercial Service of the U.S. Department of Commerce
and Japan External Trade Organization (JETRO). For a list of market
research reports available, contact the Japan Export Information Center
(JEIC) at (202) 377-2425. In addition, if your firm wishes to contract for
more detailed market research, contact the JEIC to obtain a list of market
research and business consulting firms in Japan.
Trade Shows/Missions: These events offer excellent opportunities to
introduce your product to the market, expose your company and products to a
large number of potential customers, enhance and build your company's image,
educate the market about your products, learn about the needs and
expectations of the customer, and learn about the competition. The U.S.
Department of Commerce regularly schedules showings of American products and
invites interested Japanese buyers to attend. For more information, contact
your local U.S. Department of Commerce district office or the U.S.
Department of Commerce's Japan Export Information Center (JEIC). The
various types of trade shows include the following:
Trade Events: Overseas promotions that are organized and recruited by the
U.S. Department of Commerce. The shows are industry specific and are of
usually two types. Solo Exhibits are shows which are initiated and staged
by the Commerce Department and which feature only U.S. exhibitors and their
products. International Trade Fairs are shows in which the Commerce
Department establishes a U.S. section or pavilion, featuring U.S. products
and exhibitors. Cost of participation in trade shows vary, but for
companies that have the resources, trade missions can be one of the most
cost effective ways of developing an export market. For more information,
contact the Office of International Operations at (202) 377-8422.
Matchmaker Trade Delegations: Overseas sales promotion trips arranged and
recruited by the Commerce Department. Matchmakers are week-long, industry
specific trade delegations. They are often planned in conjunction with a
recognized international trade fair. Commercial specialists at the U.S.
Embassy in Japan match American suppliers in one-on-one in interviews with
potential agents, distributors, and/or joint venture or licensee partners --
depending on the market penetration strategy of the U.S. firm. Mission
members are responsible for their own expenses and a contribution to defray
general mission expenses. For more information, contact the Office of
Marketing Programs at (202) 377-4231.
Foreign Buyer Program: Trade missions of Japanese buyers who visit U.S.
domestic sales promotion events arranged and recruited by the Commerce
Department. Foreign Buyer Shows present a broad range of products and
services with good prospects for increased international sales. For more
information, contact Export Promotion Services at (202) 377-0871.
State Representative Offices in Japan: Thirty-eight U.S. states have their
own representative office in Japan. These offices are designed to promote
exports from and encourage investment in their respective states. You
should contact your state government in order to determine what assistance
it can provide you. For a list of state representative offices in Japan,
contact the Japan Export Information Center at (202) 377-2425.
Industry Trade Associations: You should contact your trade association for
information on exporting to Japan. U.S. trade associations often have
international departments or affiliations which can provide information on
marketing; testing, standards, and certification; and intellectual property
protection. Members of the association serve as excellent sources of
information and may be able to introduce your company to a potential partner
in Japan. Also, your association may have a good working relationship with
a counterpart association or office in Japan. Some U.S. industry
associations with offices in Japan include the American Electronics
Association, the Motion Picture Association of America, Inc., the
Pharmaceutical Manufacturers Association, the U.S. Semiconductor Industry
Association, the U.S. Electronics Industry, and the U.S. Automotive Parts
Industry.
Export Trading/Management Companies: Trading and management companies are
trade intermediaries or middlemen that provide clients with a variety of
export trade services. Each trading company is unique in the combination of
services it offers and the products it handles. Some trade intermediaries
deal in a wide range of trade facilitation services while others specialize
in a few. Such services can include, for example, advertising and promotion;
consolidation of the shipments of a number of suppliers to lower freight
rates; supplying freight forwarding and international documentation; finding
suitable distributors and interested overseas buyers; providing credit
checks on overseas traders and buyers; market research; translation; and
taking title of the goods. Available through U.S. Department of Commerce
district offices is a publication titled Export Yellow Pages that lists
contact information on 1,000 U.S. export trading companies. The choice
between using a Japanese or an American sales agent/distributor should be
based on informed knowledge of the market.
Japan has more than 6,000 trading companies. Japanese trading companies
include many small, specialized firms "senmon shosha" that represent the
primary Japanese equivalent to U.S. trade intermediaries. Japanese trading
companies also include general trading companies, "sogo shosha," that
represent the vanguard of the Japanese economy. The sogo shosha account for
50 percent of Japan's exports and 60 percent of imports. The nine largest
Japanese sogo shosha have a combined annual sales volume of about $700
billion. For the year ending March 1989, the Mitsui sogo shosha alone had
$126 billion in trade transactions.
Sogo shosha are organized along industry lines, not along geographical
lines. Each sogo shosha is part of a large industrial conglomerate
("keiretsu") centered around a major bank. Most have manufacturing
subsidiaries or affiliates and serve as conduits for technology transfer
through licensing agreements negotiated for their manufacturing
subsidiaries. Sogo shosha deal with a multitude of products -- Mitsui, for
example, handles as many as 20,000 different items.
Sogo shosha act as trade intermediaries between buyers and sellers at all
stages of product and trade flow -- from upstream raw material extraction,
through production, to downstream distribution to the end-user. The sogo
shosha search for volume growth in value-added, bulk commodity products.
They are willing to play whatever role is necessary to make the project or
transaction work -- trade catalyst, joint partner, consortia organizer, and
support of major project management. Sogo shosha have vast communication
networks and have an extensive presence in foreign markets. For example,
one sogo shosha has 190 offices worldwide with 20 in the United States alone.
It is not unusual that 60-70 percent of a sogo shosha's assets are committed
to financing suppliers and customers. Sogo shosha derive financial strength
from their keiretsu's bank (often a major stockholder). Bank loans are used
to acquire or establish firms to obtain a production base or enter resource
development. The sogo shosha also reloan funds to clients. In 1987, the
sogo shosha provided over $26 billion in trade credits and $47 billion in
long-term loans and credit guarantees.
Sogo shosha tend to handle bulk items such as agricultural products,
industrial materials, and textiles. In the case of a product other than a
bulk commodity or raw material, the use of a specialized trading company or
senmon shosha should be considered. These smaller firms limit themselves to
a narrow range of products and handle most phases of the product's journey
through customs to the end-user. They often can provide greater assistance
for products which require after-sales service such as electronic
instruments and medical equipment.
The third distinctive type of trading company is the "captive" type, which
is owned by manufacturers or merchandisers. It performs foreign trade
functions for particular manufacturers and is primarily of interest to firms
that wish to export to their parent companies.
Japan's general trading companies have established an Export Promotion
Office for U.S. Manufactured Goods to advise American companies interested
in trading with Japan and other foreign countries. The companies' trade
experts are located at 105 offices in 19 U.S. cities. These offices are
linked individually by a computer system that can give manufacturers and
exporters information on markets, financing, laws, regulations, exchange
rates, and other factors with a bearing on trading decisions. For a list of
these offices in the United States, contact the Japan Export Information
Center (JEIC) of the U.S. Department of Commerce at (202) 377-2425.
Japan Chamber of Commerce and Industry: The Japan Chamber of Commerce and
Industry (JCCI) offers manufacturing directories, phone numbers, contacts,
and lists to help a U.S. company find the most appropriate partner in Japan
for a joint venture or product distribution. In addition, many of the
regional chambers of commerce and industry in Japan publish trade
opportunities or bulletins with foreign products and companies listed.
Since 1984, the JCCI has had an office in Kansas City, Missouri which can
advise your company about opportunities in the Japanese market and provide
information on Japanese companies interested in possibly doing business with
your firm. The Osaka Chamber of Commerce and Industry (OCCI) and several
municipal and business groups sponsor the annual Global Opportunities
Convention (G-BOC), which is held in Osaka, Japan. G-BOC provides an
excellent opportunity for your company to be introduced to potential
Japanese business partners. American companies can contact the JCCI for
additional information on G-BOC. JCCI contact points are located at:
JCCI JCCI
Commerce Tower Suite 2323 2-2 Marunouchi 3-chome
911 Main Street Chiyoda-ku, Tokyo 100
Kansas City, MO 64105 Japan
Phone: (816) 221-6140 Phone: 011-81-3-3283-7660
Fax: (816) 471-6523 Fax: 011-81-3-3216-6497
OCCI
2-8 Hommachibashi
Chuo-ku, Osaka 540
Japan
Phone: 011-81-6-944-6403
Fax: 011-81-6 944-6409
Japanese Department/Chain Stores: In the consumer sector, an important
feature of buying patterns has been low consumer mobility combined with high
population density. Surveys indicate that most Japanese consumer purchases
occur within a closely defined neighborhood, with the result that a large
number of Japan's retail outlets are neighborhood stores accounting for
roughly half of all retail sales. Most of these are served by three or more
wholesalers, resulting in "pyramid pricing." The emergence and growth of
self-service discount stores and "superstores" are helping to reduce the
amount of layering and price markups. In addition, department and specialty
stores are increasing their volume purchases from abroad. Department stores
in Japan typically carry 500,000 items and make 80-90 percent of purchases
from as many as 1,500 wholesalers, many of which supply goods on
consignment. Some stores are establishing central purchasing offices, and
many of the large superstore and department store chains now have direct
buying offices in the United States:
Daiei, Inc. Daimaru, Inc.
Suite 215 1114 Avenue of the Americas
1025 West 190th Street New York, NY 10036
Gardena, CA 90248 Phone: (212) 730-7138
Phone: (310) 515-0141 Fax: (212) 840-7645
Fax: (310) 515-1086
Daimaru California, Inc. Hankyu, Inc.
19401 South Vermont Ave., A-204 2951 28th St., Suite 3010
Torrance, CA 90502 Santa Monica, CA 90405
Phone: (310) 516-9716 Phone: (310) 396-8710
Fax: (310) 516-9578 Fax: (310) 396-3026
Isetan Co., Ltd. Matsuzakaya America, Inc.
666 5th Avenue, 12th Floor 460 East 3rd Street
New York, NY 10103 Los Angeles, CA 90013
Phone: (212) 767-0300 Phone: (213) 626-0133
Fax: (212) 767-0307 Fax: (213) 626-7936
Mitsukoshi, Inc. Seibu Corp. of America
465 Park Avenue 55 East 59th Street
New York, NY 10019 New York, NY 10022
Phone: (212) 753-5580 Phone: (212) 826-1144
Fax: (212) 355-7161 Fax: (212) 826-1148
Taka-Q Co., Ltd. Takashimaya, Inc.
115 West 57th St., 3rd Floor 1290 Ave. of the Americas
New York, NY 10019 Room 1731
Phone: (212) 489-4720 New York, NY 10104
Fax: (212) 664-0138 Phone: (212) 265-2577
Fax: (212) 265-1539
Tokyu Department Store Co., Ltd.
24712 Madison Street
Torrance, CA 90505
Phone: (310) 530-8207
Fax: (310) 530-4173
The retail market is in the process of change. Significant alterations in
Japan's Large Scale Retail Store Law have eased restrictions on opening new
stores. There has been a substantial increase in the number of applications
to open new retail stores since the reforms have been announced. Import
clearance procedures at airports and seaports have been simplified, and
plans are in place to improve and expand facilities in these areas.
Faced with deregulation and changing patterns of consumption, many Japanese
companies are modifying marketing and sales strategies to take advantage of
these developments. Imports are already benefiting from these trends as
seen in increased sales by Japanese department stores and other mass
merchandisers and by a variety of new retailing ventures that match changing
Japanese lifestyles. There are also indications that some distributors are
modernizing and consolidating operations.
Other U.S. Governmental Assistance: See section titled "Where to Get Market
Information and Trade Leads."
The Japanese Government: See section titled "The Japanese Government."
Choosing a Business Partner in Japan
Selecting the appropriate partner in Japan is probably the single most
critical factor for your success in the market. Your partner should be
someone with whom you can communicate comfortably -- someone who can teach
you the subtleties and finer points of the product market in Japan. Your
partner should be able to answer most of your questions regarding the sale
of your goods. He should be able to recommend alterations on your product
which are required by government regulation or which will make your product
more attractive to the Japanese consumer. You need to maintain a constant
dialogue with your Japanese partner for an effective relationship. You need
to be a good listener. You should also anticipate and respond to the needs
of your potential customers. If you are not successful in establishing a
good working relationship and trust with your Japanese partner, you will not
succeed in Japan.
Occasionally, an American exporter wishes to change
agents/distributors/representatives. The reasons for this decision may
vary. If the U.S. product does not sell well within the first
year, the American exporter often incorrectly assumes that their Japanese
partner has not done his or her job. However, there are other factors which
must be considered such as lack of patience on the American firm's part,
poor product quality or after-sales service, or an unwillingness to meet
Japanese consumer tastes. If you have established a good working
relationship and trust with your partner, you should be able to determine
what the real factors are. Remember it is difficult to change partners in
Japan. Business in Japan is driven by personal relationships. Terminating
the relationship between you and your Japanese trading partner may alienate
you from the business community. Furthermore, it is very difficult to keep
a search for another partner secret from the original partner. The impact
on the existing relationship and overall business in Japan could be fatal.
The following is a 12-point checklist for your company in choosing a trading
partner in Japan:
(1) Does your prospective partner have knowledge and expertise in your
product area, and an established network in the specific area that you
want to sell to?
(2) Can you use the distribution network that your partner owns?
(3) What is the quality of your partner's employees, and what team will be
working for you?
(4) What is the size of the sales force, and what percentage of their time
will your product receive?
(5) What is your partner's corporate culture? Are you his/her first
experience with an international company?
(6) What geographic coverage can your partner provide? Can he/she help you
deliver the product outside of the major cities?
(7) How does your partner handle strategic planning? Has he/she performed
a thorough analysis of what it will cost to handle your product?
(8) How is your partner positioned in the marketplace and what are his/her
long-term goals? Are these compatible with yours?
(9) What is your partner's attitude toward advertising and investment? Is
he/she a savvy marketer?
(10) Is there a conflict of interest between your product and your partner's
product?
(11) Do you have support from the senior management of the Japanese company
and are they accessible to you?
(12) Does the contract provide adequate intellectual property protection for
your firm?
Which is the Best Entry Mechanism for Your Company?
Selecting your best entry method requires an assessment of the potential
market size, the structure of the market, the complexity of existing
distribution channels, your firm's resources, and your willingness and
ability to commit to the Japanese market.
In evaluating the alternatives for market entry, you should carefully weigh
the alternative costs of various distribution options against the potential
market for your products. The type of product that you are interested in
exporting to Japan may make your decision easy. You should choose a
business partner who will profit from marketing your product or service and
who is experienced in importing your product line.
More Advanced Market Entry Alternatives
Beyond the agent/distributor relationship, if your firm is interested in
establishing a permanent presence in the Japanese market, other options
include setting up a representative or branch office, subsidiary, or joint
venture. In choosing an entry option, your company should consider many
points, including the volume and type of business to be carried out, costs,
and the degree of control you wish to maintain. Not every entry alternative
will suit your company.
You can also enter the market by appointing a Japanese manufacturer of a
complementary product line as your representative. This type of
representation allows you to take advantage of product compatibility with
the Japanese firm's own lines and to utilize its distribution and service
network. Such arrangements have frequently led to mutually beneficial
relationships, including licensing agreements and joint ventures for partial
or full manufacturing of products in Japan. Some foreign firms use a
freight forwarder to handle some of the details of importing, such as
arranging for transportation and customs clearance. Necessary technical
services can be arranged through contracts with specialized technical or
engineering firms which possess the required capabilities.
Establishing an Office in Japan
If your company can afford to do so and is serious about doing well in the
Japanese market, you should strongly consider the establishment of a
representative or branch office in Japan. This sort of presence will allow
your firm the most direct control of its operations in Japan and will help
ensure the quality of after-sales services. This office can gather
information on the competition, emerging new technologies, and developing
market trends.
Representative Office: A foreign company that wishes to collect information
or to facilitate contacts in Japan should consider establishment of a
liaison or representative office. This liaison office may be established to
develop market data, provide information to potential clients, and refer
customers to distributors or trading companies that can accept orders. The
office can also work with distributors to develop the necessary promotional
and service mechanism. It is not necessary to obtain special approval from
the Japanese Government to establish a liaison office, but it must have no
income and is therefore not allowed to handle orders directly. Moreover,
this option is free from Japanese tax burdens. The liaison office may
function by providing guidance and support to an agent, and managing all
marketing activities except for the formal sale.
Branch Office: To go a step beyond a representative or liaison office, you
can establish a sales or branch office. A branch office can engage in
trading, manufacturing, retailing, services, or other business. Until
recently, to set up a branch office, a company had
to file a notification with the Ministry of Finance through the Bank of
Japan between 3 months and 30 days before the office was established and
register with the Ministry of Justice within 3 weeks of the opening of the
office. However, as part of SII, this prior notification requirement has
been replaced by ex post facto notification for investment in unrestricted
sectors. A special license still must be obtained from the appropriate
Japanese ministry to engage in business in certain sectors. These include
broadcasting; telecommunications; electric power generation; domestic, rail
and air transportation; arms; gun powder; atomic energy; aircraft; space
development; narcotic manufacturing; vaccine manufacturing; security guard
services; agriculture, forestry, and fisheries; petroleum refining and
marketing; leather and leather product manufacturing; shipbuilding; banking;
and mining. A sales office may take and fill orders, and is liable for
payment of Japanese taxes. A sales office may carry out a full marketing
program, including arranging for advertising, recruiting a sales force, and
carrying out all necessary promotional activities.
Other alternatives include incorporating your own subsidiary company in
Japan, joining with a Japanese company in a joint venture arrangement, or
acquiring stock in a Japanese corporation. These options are likely to be
much more complicated and involve more time and expense, but they can offer
an effective means for a company to manufacture locally, guarantee better
protection for proprietary information, and penetrate some markets which
have subtle but substantial barriers to imports.
A major problem for smaller U.S. firms entering the Japanese market is the
high cost of establishing a permanent presence which allows for the
follow-up capability necessary to achieve full market potential. You may
wish to consider arranging for representation through the use of the
previously mentioned Agent/Distributor Service, your contacts established at
a trade show or mission, your state's representative office in Japan, or
your industry's trade association. Another approach is to pool resources of
several firms which have complementary product lines and a desire to operate
in Japan. Such a group might establish a marketing association, consortium,
or jointly owned export management company, and set up a sales and service
office in Japan. This operation may take the form of a liaison office which
handles contacts with agents, distributors, and customers. Considering the
importance of brand image in Japan, group members may wish to consider
adopting a group logo which would be a universally recognized and accepted
identity for their product line. This approach is not widely used by U.S.
firms in Japan, but has been successfully employed by a number a European
groups. Another alternative is to piggyback your product with a
complementary product line of a firm which is successfully exporting to
Japan.
In evaluating the alternatives for market entry, you should measure the
projected sales and potential market share for your products against costs
of various distribution options. In Japan, the justification for working
with an intermediary is lower cost while sacrificing direct market feedback
and long-run profit potential.
For additional information on establishing an office in Japan, refer to the
following publications:
Setting Up a Business in Japan: A Manual (1991), Japan External Trade
Organization (JETRO), New York Office -- (212) 997-0400.
Guide to Investment in Japan (1991), Industrial Bank of Japan (IBJ),
Washington, D.C. Office -- (202) 835-0455.
Guide to Direct Investment in Japan (1991), Japan Development Bank (JDB),
Washington, D.C. Office -- (202) 331-8696.
Establishment of a Representative Office in Japan (1990), Japan External
Trade Organization (JETRO), New York Office -- (212) 997-0400.
Direct Foreign Investment in Japan (1987), American Chamber of Commerce in
Japan (ACCJ).
Setting Up & Operating a Business in Japan: A Handbook for the Foreign
Businessman (1988), by Helene Thian, published by the Charles E. Tuttle
Company.
Establishing a Business in Japan (1986), U.S. & Foreign Commercial Service,
U.S. Embassy Tokyo, Unit 45004, Box 271, APO AP 96337-0001.
Licensing
Licensing product technology is an alternative with considerable appeal. A
firm can immediately contribute to its bottom line with little investment or
direct cost. What is often overlooked, however, is the missed opportunities
and indirect costs of licensing.
Licensing is a very limited form of market participation. High potential
returns from marketing and manufacturing efficiencies are lost, and very
little market information is gained. Often licensing agreements prove to be
short-lived as the licensee develops the ability to become a competitor to
the licensor in all markets. Indirect costs of managing and policing the
licensing agreement are also often overlooked. There are many cases of
licensees under-reporting sales and under-remitting royalty payments.
The key to success in a licensing agreement is having a partner whose goals
coincide with your own. Indirect expenses should be anticipated, and the
contract should provide for a cross-technology exchange between licensor and
licensee. Important to the management of a licensing agreement is having a
well-qualified individual assume responsibility over the management of the
contract. This individual should maintain close contact with the licensee
and stay abreast of the Japanese market by visiting Japan periodically. A
carefully constructed and executed licensing agreement can prove beneficial,
but the risks and costs should be anticipated.
Until recently, according to the Foreign Exchange and Foreign Trade Control
Law, nonresidents who planned to execute or amend any agreement with
Japanese nationals for the import of technology had to give prior notice to
the Ministry of Finance through the Bank of Japan and any other ministry
exercising jurisdiction over the affected industry. In practice, the
investor was notified that the Japanese Government had no objection within
one hour following notification, if the proposed investment was in
unrestricted industries. However, as part of an SII commitment, this prior
notification requirement has been replaced by ex post facto notification for
investment in unrestricted sectors. Technology transfer agreements may
normally be executed except in those cases involving the transfer of
specially regulated and/or designated technologies, in which case a report
must be filed with the Ministry of Finance and the appropriate Japanese
ministries.
Special regulations apply to the following sectors based on the U.S.-Japan
Treaty of Friendship, Commerce, and Navigation and the Code of
Liberalization of Capital Movements of the Organization for Economic
Cooperation and Development (OECD): broadcasting; telecommunications;
electric power generation; domestic rail and air transportation; arms; gun
powder; atomic energy; aircraft; space development; narcotic manufacturing;
vaccine manufacturing; security guard services; agriculture, forestry, and
fisheries; petroleum refining and marketing; leather and leather product
manufacturing; and mining.
Moreover, the Japanese Government has specified the following 12 areas as
the designated technologies which have significant influence on the security
of the nation and the interest of the national economy: aircraft, arms, gun
powder, atomic energy, space development, electronic computers, electronic
parts for electronic computers for next generation, appliances for laser
processing and light communication, innovative materials, salt electrolysis
by nonmercurial methods, petroleum production at sea bottom, and leather and
leather products.
In addition to the regulations mentioned above, international technology
assistance contracts are subject to screening by the Japanese Fair Trade
Commission (JFTC). The licensor and licensee are required to file jointly
the report of the licensing agreement with the JFTC within 30 days after the
conclusion of the contract. The JFTC is authorized to act if the contract
may be interpreted to constitute unreasonable restraint of trade or unfair
business practices. The U.S. Government has sought the removal of this
discriminatory filing requirement in the SII.
Franchising
The franchising industry has become a multibillion dollar business in
Japan. Originally developed in the fast food area, it has expanded into a
variety of new sectors. In 1989, there were 626 domestic and foreign
franchising chains in Japan with aggregate total sales of 7 trillion yen
($49 billion) at 131,267 outlets (franchised -- 115,750; directly operated
-- 15,517). The number of franchising chains, 626, is about one-third of
the franchise chains in the United States.
In general, the details of a master franchise agreement are not disclosed.
However, certain similarities among franchise agreements exist. Most U.S.
franchisors usually do not try to recruit actual shop operators in Japan
directly from the United States. Instead, U.S. firms concentrate their
efforts on finding a master franchisee, which is usually either a Japanese
company or a joint venture between the U.S. franchisor and a Japanese
company, or in some cases, a wholly owned subsidiary of the U.S. company.
The master franchise holder is then responsible for the actual recruitment
of Japanese franchisees. Usually, the master franchisee will pay the U.S.
company a lump-sum payment which is payable over a certain period of time,
in addition to royalty payments which average around 5 percent of the
sales. Since the quality and nature of services are quickly changing to
suit market demand in Japan, the life cycle of a new type of service
organization or fast food chain tends to be relatively short. Typically in
Japan, once consumer interest or need is successfully identified several
companies with similar capabilities rush into the market and generate fierce
competition. Therefore, U.S. franchising operators should consider entering
the Japanese market only after preparing a feasibility study, developing a
long-term investment plan, and carefully evaluating the timing and life
cycle of the particular good or service.
Direct Marketing
A relatively recent development has been the significant growth of direct
marketing in Japan. According to Japan Direct Marketing Association (JADMA)
estimates, total sales revenue of its members in JFY 1988 (Japan Fiscal Year
-- April 1, 1988 - March 31, 1989) was $8.8 billion, an increase of nearly
31 percent over the previous year.
U.S. direct marketers enjoy the benefit of a well-educated Japanese populace
with a high level of discretionary income and a great curiosity about the
United States. Interesting, unique, well-made, brand-name items, adapted to
Japanese tastes or sizes, sell well in Japan. The following are two
marketing methods which illustrate how U.S. products are being successfully
sold through direct marketing in Japan:
One marketing approach is to use a non-duty-free-catalog aimed at
travelers. Japanese going overseas on holiday desire to minimize the time
spent shopping for "obligatory" gifts and souvenirs for friends, relatives,
and co-workers. Japanese consumers will often know before going overseas
the gifts that they want to buy. Many travel magazines describe in detail
the "best shops" in the major U.S. cities that Japanese should visit.
Airline companies and travel agents have been aggressively promoting catalog
sales of non-duty-free imported goods, especially cosmetics, accessories,
gifts, and food (excluding most brand-name luxury goods, which have an
exclusive agent in Japan). Travelers place the orders before departing and
the goods are delivered to their home after they return. These goods are
imported just like other imports (customs-cleared, customs duty paid, and
consumption tax paid), so the price is higher than if purchased by the
traveler overseas, although usually lower than the retail price at
department stores in Japan. The primary value of this service is
convenience. There is great opportunity for firms with an innovative
approach for reaching and servicing this market.
Another marketing method is to utilize the foreign catalog sales corner at
50 major Japanese post offices. This approach, employing the so-called
International Mail Order Support Service (IMOSS), allows customers to select
merchandise from a foreign company's catalog, pay for the merchandise by
international mail order or credit card, and receive shipment directly from
the seller located overseas. There is no need for the direct marketer in
this case to stock inventory in Japan.
One negative market condition affecting direct marketing is that the
Japanese consumers desire to inspect a product prior to purchase.
Successful Japanese catalog companies maintain a showroom where the customer
can examine the product before ordering. Also, some of the largest catalog
sales operations are managed by well-established department stores and other
reliable retail chains.
Japanese consumers are demanding about the condition and packaging of
goods. Everything must arrive in perfect order, just as if they had
purchased the item in a store. It is very common that goods are returned
for claims of damage. Direct marketing should not be seen as a way to get
around the Japanese customer's expectation of strong after-sales product
support.
Without a well-established position, it is unrealistic for a U.S. company to
expect to rent a mailing list, send an English-language catalog directly
from the United States to Japanese individual customers, and be inundated
with orders placed by these customers. U.S. companies aiming to enter this
market should at least be prepared to make an investment in service
functions such as market research and product support. In addition, a
representative in Japan can act as a liaison with the U.S. supplier to
handle receipt of claims, customs clearance, public relations, and the
preparation of a Japanese-language catalog. Warehousing and delivery can be
managed by the representative as well.
The Japan Direct Marketing Association: In response to the recognized need
for assistance in the direct marketing field and with the guidance of the
Japanese Ministry of International Trade and Industry (MITI), the Japan
Direct Marketing Association (JADMA) was founded as Japan's first and only
officially recognized direct marketing association on October 11, 1983. The
aims of JADMA are: advancement of a standard of commercial ethics in the
direct marketing industry; promotion of fair business practices; consumer
protection and education; a systemized structure for settling consumer
complaints; modernization of the direct marketing industry; representation
of the trade's interests with appropriate government agencies; conducting
seminars and developing educational programs; collection and distribution of
information from both domestic and international sources; and greater
contact and cooperation with related trade associations overseas. In
addition, JADMA conducts research aimed at exploring the future potential
for utilizing new media forms by the direct marketing trade. JADMA's
address is:
The Japan Direct Marketing Association
No. 32 Mori Building, 3-4-30 Shibakoen
Minato-ku, Tokyo 105 JAPAN
Phone: 011-81-3-3434-4700
Fax: 011-81-3-3434-4518
Pricing
The acceptance of your product in the Japanese market is based primarily on
its quality and after-sales service, not its price. However, pricing
analysis is a critical aspect of marketing in Japan for your company.
Markups at the various levels of the Japanese distribution system have
caused some imported items to be priced at levels which are noncompetitive
with Japanese domestic products, even though the landed price of the
imported product was comparable. Prices of competitive Japanese products
can usually be taken as a starting point for tracing back through
distribution channels the appropriate margins for each link in the chain.
You should carefully examine the margins which are provided by both the
domestic and foreign competition and compare the cost of establishing your
own channels. Negotiations with a prospective agent should be conducted to
determine a realistic selling price which would include reasonable and
acceptable markups. Your company should also attempt to eliminate from its
export price all purely domestic costs involved in marketing the product in
the United States.
Advertising
Successful marketing in Japan of your product requires appropriate
advertising and market research. In many instances, you can rely on your
trading partner for assistance.
American exporters often find that advertising strategies that succeeded in
other countries will not work in Japan. Advertising which appeals to the
emotions and senses rather than logic is successful in Japan. As a
homogeneous and extremely literate country with a highly concentrated
population, Japan is well-suited for the use of mass media advertising.
With almost instantaneous communication emanating from Tokyo and several
regional communication centers, advertising through mass media plays an
important role in marketing in Japan.
Television, radio, and both mass circulation and specialized newspapers and
magazines are available for advertising. There are a large number of
general and specialized business publications available for reaching the
target audience for the marketing of such goods as industrial products.
Transit advertising in railway cars and buses is particularly common because
of the high degree of reliance on public transportation, and the long
commute encountered by many Japanese workers. Outdoor advertising is also
popular and use of direct mail promotions is growing at a rapid pace.
The Japan Fair Trade Commission regulates sales promotion with rules
regarding the value of premiums which can be offered in connection with
sales promotion, the type and content of product labels, and the claims
which manufacturers can make about their products in advertisements. Local
governments have strict rules governing the design, size, and usage of
outdoor advertising.
For a list of American and Japanese advertising and public relations firms
in Japan, mailing and mailing label services, or a selected list of business
publications in which your firm could advertise, contact the Japan Export
Information Center at (202) 377-2425.
The Japanese Consumer
Your company should carefully consider the characteristics and preferences
of the over 123 million consumers in Japan. Japanese consumers are the most
discriminating shoppers in the world. They have become increasingly
sophisticated in their tastes and demand high quality and good after-sales
service in the products they purchase. After-sales service in Japan is an
"attitude." It is not uncommon for a Japanese manufacturer to apologize for
a breakdown in a piece of machinery it serviced two years ago when the
customer returns to purchase another product. The Japanese also continue to
be rather brand-conscious, but a trend toward individuality has been
noticeable in recent years. The Japanese make greater demands in terms of
the appearance of a product. Packaging is a very important factor in
marketing. For example, the gift-giving market in Japan is very large.
However, great emphasis is placed upon the packaging with less importance
placed on the gift itself (typically in the $10-$15 price range). In
addition, for trade shows, the presentation of the product and the booth is
as important as the product itself. Remember, image is everything in Japan.
The standard of living in Japan is relatively high, although housing
standards and the amount of leisure time are lower than in other
industrialized countries. Medical care in Japan is good, a nationalized
health care system is in place, and the Japanese life expectancy is among
the highest in the world. The Japanese education system is topnotch and the
literacy rate is approximately 99 percent.
According to the Japan External Trade Organization (JETRO), Japanese
families tend to spend the largest part of their monthly income on food (27
percent), followed by hobbies and leisure (12 percent), housing (5 percent),
and clothing (5 percent). Monthly expenditures on leisure have been
increasing recently as the Japanese economy becomes more consumer-oriented.
Homes in Japan, particularly urban areas, are very small. This fact should
be taken into account by your company because the lack of storage area in
most homes limits the amount and size of Japanese purchases. Furniture and
appliances therefore must be scaled down in size in order to fit into most
Japanese homes. Likewise, since the Japanese tend to be smaller physically
than Westerners, clothing and shoe sizes should be scaled down to fit the
local standards.
The consumer market in Japan is segmented according to factors such as age,
sex, income level, and lifestyle. While the mass media's nationwide
influence and standardized education have contributed to the homogeneity of
the Japanese population, regional differences exist in areas such as climate
and cuisine. Tastes vary tremendously depending on age and sex in Japan.
Like their American counterparts, Japanese young people tend to enjoy trendy
items. Japanese college students have more leisure time than junior or
senior high school students. The average male white-collar worker in Japan
spends a portion of his salary on dining, alcohol, lunch, golf, cigarettes,
hobbies and leisure. A noteworthy trend of equivalent wage earning females
is that they spend more money than their male counterparts. These women,
along with single males and students, are leaders in consumer spending in
Japanese society due to their high incomes and large discretionary spending
habits. After men join the work force, they become more conservative and
usually have less money for discretionary spending. Until marriage, young
working women usually live at home. Once married, they tend to leave their
jobs in order to manage their households, including the family budget.
Another significant change in the consumer market is the graying of Japanese
society as more and more Japanese are nearing retirement. Retired persons
tend to have more leisure time and more discretionary income.
How to Please the Japanese Consumer
The following tips should help you satisfy the needs of your potential
customers:
Give a High Level of Support to Customers: In virtually every product or
service sector, markets in Japan are competitive to a degree unknown in most
other countries. Consequently, Japanese buyers, agents, and distributors at
all levels of the distribution chain are accustomed to receiving a higher
level of support than many foreign suppliers normally provide. Suppliers
commonly provide comprehensive personnel services, including actual staffing
of retail points of sale and training of the buyers' personnel. Suppliers
also work with buyers to help develop uses and applications for products.
Know Every Detail: Because large numbers of companies are struggling to
increase market share in all sectors, they have become adept at identifying
small niches in their sector and being the first or best at creating
products meeting specialized demands in those niches. Successful
differentiation of your product is necessary to set your product apart from
the competition.
Design for the Market: The fragmentation of sectors into a multitude of
small, specialized niches and the willingness of Japanese companies to
create products to fit those niches means suppliers must work closely with
all levels of the distribution chain to provide products specifically
designed for their target market. In the United States, a market is often
created for a product; in Japan, the product must be tailored for a specific
market.
Expect Small Orders at First: Small initial orders are a natural outgrowth
of competition, differentiation, and the Japanese willingness to design for
the market. The companies and people involved with a new product must
assure themselves that the item will meet the specific needs of the customer
by testing the market.
Emphasize Quality: Attention to quality standards is perhaps the most
important aspect of the Japanese market. The Japanese are accustomed to
high quality and they insist on it. The concept of quality applies not only
to the product, but to its presentation as well. For instance, in
day-to-day life, how food is presented and the way gifts are wrapped are
just as important as the items themselves. Your firm must do its homework
and be sure that items translated into Japanese are properly prepared and
free of grammatical and typographical errors.
Recognize Japanese Sense of Structure: Japanese are proud of their strong
sense of unity, organization, and structure. In group meetings, your firm
should make clear through its actions who is the "point person" or senior
spokesperson for the group. This action often can be accomplished through
the use of business cards. Exchange of business cards is a necessary
formality in business meetings, and it is advisable to have them translated
into Japanese on the reverse side. Also, it is often a good idea in initial
meetings to outline your company's structure and history.
Demonstrate Reliability: To succeed in Japan, it is very important to keep
promises made and to respond promptly to communications from Japanese
business and trading partners, especially when problems or emergencies
arise. Reliability extends to permanence in the marketplace. The Japanese
need to know that you will be in the market for the long term.
BUSINESS CUSTOMS AND PRACTICES
An understanding of and sensitivity to Japanese business and social
practices is of great importance in establishing and maintaining strong and
successful business relationships in Japan. Many Americans may assume that
because meetings and correspondence are carried out in English, Western
rules apply. While Japanese business executives do not expect foreigners to
be fully knowledgeable about all business and social customs, you will find
that accommodation to such customs and practices is well worth the effort.
Remember, you are not just trying to sell your product, but also the image
of your company and, to a large degree, yourself. Showing understanding and
sensitivity will only help in your efforts to succeed in Japan and will
demonstrate to your potential customers your seriousness about the market.
Japanese business executives place considerable emphasis on face-to-face
contact. A personal call on a potential business partner based on an
introduction will be more effective than initiating contact by a letter or a
fax. The "cold approach" is definitely not the best approach in Japan.
Time and time again, American firms that make such overtures find that the
Japanese companies they have contacted do not reply. Rather, an
introduction by an intermediary who holds significant status is of
tremendous assistance in establishing business contacts and cannot be
overemphasized.
Initial contacts between Japanese firms are usually formal and made at the
executive level, while more detailed negotiations are often carried out at
the working level. The main purpose of a first meeting is to get
acquainted, establish the broad interest of the calling party, and allow
both sides an opportunity to access each other to determine whether or not
more substantive discussions are desirable. Do not expect to have a
contract signed by the time you leave the first meeting. Remember, the
objective of your first few meetings is to establish rapport and trust
between the two parties. A futile attempt to pressure your potential
partner into a contract will only alienate.
Business cards (meishi) are exchanged extensively in Japan and serve as a
useful reference and record of contacts. The exchange of business cards,
usually at the start of a meeting, helps to formalize the introduction
process and establishes the status of the parties relative to each other and
their place of business. You should attempt to familiarize yourself with
the etiquette of exchanging cards, as well as other Japanese social
practices. The traditional Japanese greeting is the bow, although most
Japanese dealing with foreign business executives will expect to shake
hands. A nod of the head or slight bow by a foreigner in acknowledgement of
a Japanese bow is appreciated. Japanese business executives do not normally
deal on a first name basis in business relationships, and initial business
and social contacts are characterized by politeness and formality.
One source of confusion in business communication may come from the Japanese
language itself. The word "hai" means yes in Japanese but its usage varies.
"Hai" is often used to mean "yes, I understand what you said" rather than
"yes, I agree." It is usually safer to assume that a Japanese person is not
making a decision but instead is acknowledging and understanding what has
been said. Also, the Japanese language is less precise than English and
allows the Japanese to be deliberately vague. The concept of saving or
losing face is an important one, and the Japanese are able to avoid
confrontation, embarrassing situations, and direct rejection by their use of
indirect language.
The Japanese rely heavily on nonverbal communication. They tend to look to
nuances, inferences, and signals to convey intent. Thus, while American
negotiators are inclined to focus on tactics and press for agreement as a
negotiating objective, the Japanese side prefers to probe, feel out the
other party, and be relatively certain of the other side's position before
putting forward a proposal on which both sides can agree.
Interpreters are widely used in business meetings between Japanese and
foreign firms. While many Japanese business executives speak some English,
the use of a good interpreter can avoid miscommunication. The effective use
of an interpreter requires preparation, including the thorough briefing of
the interpreter in advance on the background of the meeting, and on any
technical aspects which may be covered in particular. Using an interpreter
efficiently can make or break a potential business deal. Always bring your
own interpreter, even if the Japanese side is supplying one and even if the
Japanese side speaks English as well. Try to always use the same
interpreter. Have the interpreter debrief you after the meeting on his/her
impression of nonverbal signals and the mood of the meeting, and
conversation among members of the Japanese side. After a meeting (or trade
show, if applicable), go through the business cards and other information
that you have collected. Have the interpreter translate the cards not
already translated and clarify those that are, especially titles. Get the
interpreter's impression on who is in charge, whether the people you have
met have the ability to make decisions, and what the next move of the
Japanese side may be. Speak slowly and clearly, avoid idioms or slang that
may be difficult to translate, and look at your Japanese counterparts, not
the interpreter, when speaking.
The group decision-making process which is universal in Japan may make it
impossible to receive a prompt response. The Japanese negotiator represents
a group, and until internal agreement has been reached on issues under
discussion, no commitment can be made. For this reason, you should not
expect an immediate answer, but should recognize that negotiations normally
extend over a long period of time. It takes a longer time to cultivate
business relationships in Japan than in the United States. American
business executives coming to Japan expecting to settle their business in
just a few days often depart in frustration, having made no progress.
The Japanese approach business negotiations in a tentative manner,
developing a relationship in stages: first, a limited arrangement; then, if
the relationship is mutually satisfactory, it may be expanded into a
broader, more binding agreement. Since Japanese are accustomed to
international business dealings, the foreign preference for more formal and
structured contractual obligations is recognized. Therefore, contracts have
become a universally accepted practice in foreign trade. However, Japanese
business executives emphasize good faith over legal safeguards in business
relationships and have little confidence in detailed contracts which attempt
to cover all possible contingencies.
The Japanese preference is for broad agreements and mutual understanding, so
that when problems arise they can be handled flexibly on a case-by-case
basis. Thus, discussions with Japanese entities should be comprehensive.
Before entering into a contractual agreement, both sides should thoroughly
and openly discuss the arrangement and their expectations to avoid
misunderstandings later. Japanese prefer the security of long-term,
reliable, and exclusive business arrangements. Once a commitment is made,
it is for the long term, and it becomes quite difficult to break an
agreement and find a new Japanese business partner.
Although all forms of payment are in general use in international
transactions, an irrevocable letter of credit payable on sight is the most
common form of settlement. Deferred payments in transactions with U.S.
firms are comparatively rare. With Japan, trade settlements are customarily
done on the basis of promissory notes, typically 60 to 120 days, and banks
will provide short-term financing through discounting and rollover of notes.
In the instance of a commercial dispute settlement, the Japanese legal
system tends to be slower and more cumbersome than its U.S. counterpart. In
general, Japanese companies are more apt to seek out-of-court dispute
settlements and avoid judicial proceedings.
The following are typical Japanese negotiating tactics:
(1) The Japanese usually respond to the other party's proposal -- rather
than taking the initiative.
(2) The Japanese tend to single out specific elements and negotiate one
element at a time -- rather than packaging a deal.
(3) The Japanese tend to maintain a relatively quiet response mode at
meetings after stating their official position. They usually allow the
other party enough maneuverability in order for the other party to keep
giving bit by bit.
(4) Once a concession is made, it becomes the new baseline (without a
counter-concession on their part) and they move on to the next item.
Their strategy usually is to keep whittling away one concession at a
time.
(5) The Japanese use time and patience to wear down their opponent --
consciously planning on long, drawn out periods of successive meetings.
(6) The Japanese negotiating team never has the authority to commit in a
"give and take" type approach. They are usually only authorized to
receive offers and communicate prior authorized consensus positions.
(7) The Japanese tend to use the "bad guy" ploy extensively, that is,
constantly referring to other organizations such as government
agencies/authorities concerning requirements or required concessions.
How to respond:
(1) Do not expect rapid progress.
(2) Learn to be quiet and accept long pauses in discussions. Out wait the
Japanese until they respond constructively to your last proposal.
(3) Do not make successive individual concessions -- insist on a package
deal.
(4) Do not make a follow-on proposal with further concessions until the
Japanese respond to the current proposal with concessions on their
part. Set an agenda for the next meeting accordingly.
(5) Do not fall for the "cultural differences" ploy. Be polite but direct.
You can expect the Japanese to understand Western business practices and
culture. They should be prepared to compromise and accommodate on those
issues which you identify as vital and absolutely essential. However,
you should likewise show an appreciation of Japanese culture. This will
help facilitate negotiations.
(6) Keep records on concessions by both parties.
(7) Have a fluent Japanese speaker present at negotiations to preclude
private discussions during meetings and to insure the translations are
accurate.
(8) Negotiate from a position of strength and confidence. The Japanese do
not respond positively to real or perceived weakness, nor do they
respond to idle threats and intimidation.
BEST U.S. EXPORT PROSPECTS
Many areas in the Japanese market have substantial opportunities for U.S.
exporters to Japan. Today, exporting American goods and services, as well as
investment in Japan, is a wise course for many businesses planning
expansion. The competition is intense, but when an American firm correctly
identifies a competitive window in a Japanese product sector and has the
capability to effectively export a quality product to Japan, it will likely
find an opportunity for successful sales. A great effort must be made to
gain initial market share. However, a firm with long-range goals is
well-positioned to find eventual profitability.
The following ten product areas are considered to offer significant export
opportunities to American firms. They were chosen because they offer (1)
short-term growth potential or (2) a large market receptive to additional
U.S. suppliers. The list highlights product areas where Japanese demand is
strong, and American suppliers are competitive and have the greatest
likelihood of expanding exports to Japan. For many of these sectors, a
brief Industry Subsector Analysis (ISA), which provides more information, is
available. For a list of ISAs, contact the Japan Export Information Center
(JEIC) at (202) 377-2425.
Note, however, that the term "promising export areas" does not necessarily
mean that U.S. companies in these sectors can successfully enter the market
or that they are better-positioned to satisfy market demand and to take a
market share over other competitors. Rather, it more specifically means
that various commercial environmental factors indicate that there is
increasing demand in such sectors and that after having identified the
opportunities for growth, domestic companies are aggressively entering the
market, as well as other Asian and European firms. Therefore, competition in
promising export product areas is very intense, with domestic companies
especially inclined to rush into these market sectors irrespective of the
effect on short-term profitability.
The name of each product sector is followed in parentheses by: (1)
estimated market size in 1991, (2) estimated market growth rate from 1991 to
1993, (3) estimated U.S. imports in 1991, and (4) estimated average growth
rate of U.S. imports in 1991.
Pharmaceuticals
($50 billion, 3 percent, $900 million, 5 percent)
Japanese physicians and other medical specialists look to the United States
for the most advanced products. However, in the over-the-counter market,
U.S. brands are not very well known. Japanese drug manufacturers have
stepped up their R&D activities, and European suppliers are consolidating
their distribution networks. Importation and sales, as well as local
production, of pharmaceuticals is one of the most tightly regulated areas.
There are two interrelated Japanese governmental approvals necessary: a
"shonin" for a product based on its efficacy and safety and a "kyoka" for
the business of manufacturing or importing, which requires a minimum level
of personnel and facilities. Pharmaceuticals account for approximately 30
percent of Japan's total medical expenditures. Products for an aging
society, including diagnostic and therapeutic drugs for elderly diseases,
have high growth potential. The most promising subsectors are in-vitro
diagnostic test reagents and home tests, with an estimated market size of
approximately $2 billion and $35 million, respectively.
Telecommunication Services
($60 billion, 8 percent, $2.7 billion, 10 percent)
The Japanese Telecommunications Law (TBL) was liberalized to allow
competition with the traditional common carriers, Nippon Telegraph and
Telephone (NTT) and Kokusai Denshin Denwa (KDD). As a result, there are
some 40 Type I (common) carriers competing with them. The TBL also allows
one-third foreign equity participation in the common carrier business. In
particular, Regional Bell Operating Companies (RBOC) should have an
excellent opportunity to participate in Type I business. The market for
land mobile communications services will grow rapidly in the future, which
should present further opportunities in the next generation of services for
cordless telephones. A most promising subsector is cordless telephone
licensing/Japan-wide services with an estimated market size of approximately
$800 million.
Marine Fishery Products
($30 billion, 1.5 percent, $2.5 billion, 12 percent)
Demand in this sector remains basically strong. The total Japanese domestic
catch in 1990 decreased from 1989 by 9 percent to approximately 11 million
metric tons. Notable decreases are seen in sardines, 12 percent to 3.6
million tons; Pacific mackerel, 47 percent to 248,000 tons; Alaskan pollock,
23 percent to 883,000 tons; squid, 28 percent to 532,000 tons; bonito, 12
percent to 299,000 tons; and tuna, 7 percent to 278,000 tons. Total imports
in 1990 improved by 6 percent to about $11 billion from 1989. Imported
seafood comprised approximately 30 percent of total seafood consumption.
Notable increases were seen in fresh and live seafood such as shrimp,
salmon, and tuna. Processed seafoods, such as eel and pollock roe, also
increased. The top seafoods imported from the United States include frozen
Pacific salmon ($650 million), frozen snow crab ($260 million), frozen
surimi ($240 million), frozen sablefish ($110 million), frozen king crab
($100 million), frozen salmon roe ($93 million), frozen cod/pollock roe ($90
million), frozen herring ($75 million), frozen cod ($70 million), and live
or fresh sea urchin ($67 million). The most promising subsectors include
fresh and frozen salmon (an estimated market size of approximately $2
billion), frozen crab ($850 million), and frozen mackerel ($100 million).
Biotechnology Products
($700 million, 15 percent, $10 million, 10 percent)
Japanese look to the United States for innovative technologies and products
in this field. Historically, Japan has had good fermentation technology.
Large nontraditional biotechnology companies which have abundant financial
resources are also making inroads. It is widely believed in Japan that
biotechnology could trigger a second technological revolution, following in
the wake of the electronic revolution. According to the Bioindustry
Association, the market by the year 2000 will be approximately 15 trillion
yen (roughly $107 billion at 140 yen/US$). Both the Japanese Government and
private sector are accelerating their R&D in biotechnology. The most
promising subsectors include pharmaceuticals and chemicals, with market
sizes of approximately $460 million and $100 million, respectively.
Medical Equipment and Supplies
($10 billion, 5 percent, $1.5 billion, 10 percent)
Japanese medical professionals generally look to the United States for
innovative and advanced products, but some criticize the lack of good
after-sales service from U.S. suppliers. Competition from local
manufacturers, followed by German and Swedish suppliers, is strong.
Japanese technology is said to be superior to other countries in areas such
as ultrasonic equipment and fiberscopes. The United States dominates
markets for implantable devices including pacemakers, artificial heart
valves, and artificial joints. Importation and sales, as well as local
production of medical equipment, are tightly regulated. There are two
interrelated Japanese governmental approvals necessary: a "shonin" for a
product based on its efficacy and safety and a "kyoka" for the business of
manufacturing and importing, which requires a minimum level of personnel and
facilities. The Japanese market for products in this sector is steadily
expanding. Products for the elderly and, in particular, cost-effective
diagnostic and therapeutic products have high growth potential. The most
promising subsectors include diagnostic imaging equipment and implantable
devices.
Industrial Chemicals
($160 billion, 3.5 percent, $6.5 billion, 10 percent)
Imports from the United States constitute approximately one-third of
Japanese chemical imports. Many Japanese trading companies are aggressively
seeking opportunities to develop new businesses with U.S. chemical
companies, even for very small market niches. Innovation is the key factor
which they want to see in these types of products. Even large trading
companies, which need at least $15 million in annual sales to sustain one
employee, look for new business with as little as $300,000 in annual sales
potential. For small to medium-sized Japanese trading companies, the
prospective sales figure can be as low as $150,000. Small to medium-sized
U.S. chemical companies with unique technology should have good
opportunities. The most promising subsector is specialty chemicals, with a
market size of approximately $100 million.
Aircraft and Parts
($8.9 billion, 8 percent, $4 billion, 10 percent)
The number of U.S. manufacturing firms in the aircraft sector is limited and
virtually all have offices in Japan. These companies are constantly
evaluating the balance between competition and cooperation with Japanese
manufacturers involved in aerospace. The number of cooperative efforts
among American, European, and Japanese firms has increased markedly in
recent years. While the United States still maintains a commanding lead in
aircraft and components, demonstrated by the U.S. bilateral trade surplus,
Japanese aircraft exports have been expanding in recent years. Another
important competitive factor is the entry of European manufacturers into the
Japanese market. Their aggressive marketing efforts pose a possible threat
to the long-standing dominance of U.S. products in the Japanese market. The
most promising subsectors are military and civil aviation aircraft with
market sizes of approximately $2.9 billion and $3.4 billion, respectively.
Architectural/Engineering/Construction Services
($620 billion, 5-12 percent, N/A, N/A)
On May 25, 1988, the U.S.-Japan Major Projects Arrangement (MPA of 1988)
became effective. The MPA designated 17 major projects as special-measure
projects offering opportunities for U.S. firms in architectural design,
engineering consulting, construction, and goods procurement. The estimated
value of these projects is $17 billion. In June 1991, the U.S. and Japanese
Governments completed a two-year review of the MPA and reached an agreement
to renew and revise the MPA of 1988. The new arrangement expanded coverage
to 17 additional projects, as well as 6 pending projects. These 23
additional projects are worth an estimated $26.7 billion. The most
promising subsectors, along with an estimate of their market size in
millions of U.S. dollars, are architectural services for private projects
($7,800), resorts in western Japan ($28,000), Sports Island ($850), Kyoto
Station Building ($700), and Synchrotron Projects ($300).
Sporting Goods
($14.1 billion, 4 percent, $365 million, 5 percent)
The import market for sporting goods has grown by 6 percent per year for the
last several years, and this upward trend is expected to continue until the
end of this century. Several factors are driving this growth, including
resort development, an increase in leisure time, the development of new
lightweight materials, and international competition such as the Olympics
which are to be held in Nagano in the winter of 1998. As a result of an
increased interest in nature, outdoor activities have become very popular,
and the market for outdoor equipment should continue to grow. The most
promising subsectors, along with an estimated market size in millions of
U.S. dollars, include golf equipment ($2,700), outdoor equipment ($1,400),
pleasure boats ($600), and fitness equipment ($500).
Computer Software and Services
($19 billion, 25 percent, $280 million, 30 percent)
A shortage of computer software engineers forces computer end-users to use
packaged software more, and to seek systems software to increase
productivity of software development. To enter the Japanese market,
"Japanization" is a must, including localization,
and translation of computer software. The software to be introduced to the
Japanese market should have a good sales record in the U.S. market. The
most promising subsectors include personal computer software and baseline
software for mainframes, with an estimated market size of $1.2 billion and
$1.1 billion, respectively.
Other promising export areas include the following sectors:
(1) Building Products
($6.7 billion, 3 percent, $1.1 billion, 2 percent)
(2) Laboratory Scientific Equipment
($4.1 billion, 7 percent, $720 million, 9 percent)
(3) Computers and Peripherals
($38 billion, 10 percent, $2.7 billion, 10 percent)
(4) Plastic Materials and Resins
($49 billion, 5 percent, $900 million, 17 percent)
(5) Automotive Parts
($92 billion, 5-10 percent, $680 million, 15 percent)
(6) Films and Videos
($1.5 billion, 3 percent, $425 million, 10 percent)
(7) Jewelry
($18.2 billion, 3 percent, $340 million, 4 percent)
(8) Telecommunications Equipment
($15.8 billion, 5 percent, $750 million, 35 percent)
(9) Apparel
($67 billion, 3 percent, $185 million, 6.5 percent)
(10) Household Consumer Goods -- Interior Industry
($56 billion, 7 percent, $250 million, 20 percent)
(11) Machine Tools and Metalworking Equipment
($7.9 billion, 20 percent, $195 million, 30 percent)
(12) Industrial Process Controls
($3.5 billion, 5 percent, $120 million, 8 percent)
(13) CAD/CAM/CAE Systems
($2.5 billion, 15 percent, $1.1 billion, 20 percent)
(14) Processed Foods
($185 billion, 5 percent, $2 billion, 7 percent)
(15) Paper and Paperboard
($56 billion, 3 percent, $600 million, (-)1-(+)2 percent)
(16) Electronic Components
($33.8 billion, 13 percent, $6.2 billion, 20 percent)
(17) Electronics Industry Production and Test Equipment
($17 billion, 7.6 percent, $1.5 billion, 6 percent)
(18) Giftware
($25 billion, 5 percent, $125 million, 15 percent)
(19) Veterinary Equipment and Supplies
($3.2 billion, 25 percent, $200 million, 30 percent)
(20) Automobiles and Light Trucks/Vans
($90 billion, 5-10 percent, $510 million, 10 percent)
(21) Advanced Ceramics
($7.3 billion, 9.6 percent, $65 million, 15 percent)
(22) Pollution Control Equipment
($5 billion, 8 percent, $10 million, 9 percent)
(23) Cosmetics
($14 billion, 5 percent, $64 million, 50 percent)
(24) Health Care Services
($155 billion, 5 percent, $10 million, 10 percent)
(25) Wooden Furniture
($19.2 billion, 10 percent, $86 million, 30 percent)
(26) Air Conditioning and Refrigeration Equipment
($16.7 billion, 5 percent, $115 million, 10 percent)
(27) Made-Up Textile Products
($9 billion, 4 percent, $90 million, 5 percent)
(28) Security Equipment
($1.5 billion, 12 percent, $5 million, 23 percent)
(29) Printing and Graphic Arts Equipment
($3 billion, 12 percent, $65 million, 15 percent)
(30) Coal
($7.4 billion, 2 percent, $755 million, (-)5-(+)2 percent)
JAPANESE GOVERNMENT PROCUREMENT
Of the 5.6 billion SDR (Special Drawing Rights -- 1 SDR is equal to $1.32 as
of July 1991) in Japanese Government purchases of goods and services (the
total public market), about 320 million SDR are open to foreign competition
under the Government Procurement Code of the General Agreement on Tariffs
and Trade (GATT). Government entities are interested in purchasing a wide
range of goods from telecommunications and computer equipment and scientific
and testing instruments to less sophisticated products and supplies.
If you want to sell under the government procurement program, you should
appoint a local agent or representative (local representation, though not
mandatory, is recommended strongly because of short deadlines and the
necessity to submit bids and other documentation in Japanese), be
prequalified by the government agency to whom you wish to sell, and then
attempt to win the tender under competitive bidding practices.
Most Japanese Government entities use permanent lists of qualified suppliers
under a selective tendering system. During the time period from December to
February of each year, an announcement will appear in the official Japanese
Government gazette, the Kampo, with information on procedures and criteria
for becoming a prequalified bidder for a particular agency. In order to be
placed on the lists, suppliers and/or their agents are required to apply
during a specified period prior to the beginning of the fiscal year, usually
sometime in January or February. Foreign suppliers are permitted to apply
through the end of the Japanese Fiscal Year (JFY) ending each March 31.
Specific tender notices are published in the Kampo at various times 50 days
prior to the time of bid. Under the provisions of the GATT Procurement Code,
foreign companies are permitted to bid on specific invitations prior to
qualification if there is sufficient time to complete the qualification
procedures.
To assist your firm in competing for Japanese Government contracts, the U.S.
Department of Commerce has extended its Trade Opportunities Program (TOP) to
disseminate summaries of translated tender announcements. Tender
announcements appear in the Commerce Business Daily on a regular basis.
Tender documents can be obtained directly
from the tender requestor (name and address found at the top of each
Commerce Business Daily listing). However, all Japanese Government tender
documents and all qualifying bids and contracts must be prepared in
Japanese. Nippon Telegraph and Telephone (NTT) tenders are one of the few
exceptions which can be submitted in English. The U.S. Department of
Commerce district offices can help potential U.S. bidders by identifying
firms that can provide translation services. The chances of successfully
bidding on these tenders without some representation in Japan is very
limited.
If you have an agent or representative in Japan, you can contact the
appropriate Japanese Government ministry through it. If not, the following
companies may be of assistance:
Mr. Robert F. Connelly Ms. Eriko Tanaka
Procurement Services Int'l K.K. Procurement Services Int'l, USA
Asahi Sanbancho Plaza #206 31 St. Marks Pl. #14
7-1 Sanban-cho New York, NY 10003
Chiyoda-ku, Tokyo 102 Japan Phone: (212) 674-2587
Phone: 011-81-3-3234-6921 Fax: (212) 541-8350
Fax: 011-81-3-3234-6915
Mr. Tom Frost Mr. Grif Frost
Frost International Corp. Frost International Corp.
3007 31st Avenue 1-11-3 Higashi, Shibuya-ku
Forest Grove, Oregon Tokyo, Japan 150
Phone: (503) 357-6783 Phone: 011-81-3-3499-5745
Fax: (503) 359-5650 Fax: 011-81-3-3499-5074
Mr. Y. Watanabe Mrs. Mie Teno
Vice President Managing Director
Fujikasei Co., Ltd. Deltapoint International Ltd.
Takasa Bldg. 8F 9-20 Ichibancho, Suite 603
4-13-16 Awaza Nishi-ku Chiyoda-ku, Tokyo 102 Japan
Osaka, Japan 550 Phone: 011-81-3-3221-1751
Phone: 011-81-6-532-7431 Fax: 011-81-3-3221-1753
Fax: 011-81-6-532-7435
REGIONAL OUTLOOK OUTSIDE THE TOKYO AREA
Osaka and the Kansai: The Kansai is the region centered around the cities
of Osaka, Kyoto, and Kobe. It boasts a population of 22 million. The six
prefectures comprising the area -- Osaka, Shiga, Nara, Wakayama, Kyoto, and
Hyogo -- account for almost 20 percent of Japan's total economic output.
The Kansai's GNP exceeds $410 billion, which is a figure that represents
approximately 3 percent of the world's output. If classified as a country,
the Kansai would rank above Canada as number seven among the world's largest
economies. Osaka, the largest city in the Kansai with a population of
approximately 4 million, serves as the commercial hub for the entire
region. The Kansai area, and specifically Osaka, is Japan's historical
business center. Several major industries in Japan, including
pharmaceuticals, textiles and apparel, sporting goods, and chemicals, are
concentrated in the Kansai.
The Kansai is also the center for a number of major construction projects.
A recent survey conducted by the Kansai Revitalization Center (KIRC) lists
822 major projects in the Kansai area valued at over 35 trillion yen
(approximately $250 billion). This major project development represents
tremendous opportunities for U.S. companies. These opportunities range from
design and construction services to supply of building materials and resort
and leisure equipment.
Businesses in the Kansai benefit from lower operating costs, and a lower
cost of living, than those in Tokyo. For example, the monthly rent for a
three-room office in Osaka is $670 compared to $2,300 in Tokyo. A typical
condominium in Osaka rents for $800 a month compared with $4,000 in Tokyo.
Osaka is less than three hours to Tokyo by bullet train.
The U.S. Department of Commerce has an office in Osaka and is available to
counsel U.S. companies on business opportunities in the region. The
American Chamber of Commerce in Japan has a Kansai chapter, which has over
300 members. In addition, other groups such as the International Business
Association provide strong networking opportunities.
Nagoya and the Chubu Region: The Chubu region is located in central Japan
and includes the prefectures of Aichi, Gifu, and Mie. Nagoya, located in
the Aichi prefecture, is the largest city in the Chubu area and has a
population of over 2 million. The GDP of the Nagoya area alone is as large
as the Republic of Korea's. The Chubu region is the home of such industrial
companies as Toyota, Noritake, Brother, Makita Power Tools, and Nippon
Denso. This region is currently attracting a significant amount of
attention both domestically and internationally. Plans for a new 24-hour
international airport have begun, and the airport is expected to be
operational by the year 2005. Developments in the auto, aerospace, and new
materials industries are also bringing attention to this area. A number of
U.S. aerospace companies have been making significant investments in the
Nagoya area. Moreover, automobile parts suppliers and other high technology
companies view Nagoya as an excellent base for research and development
centers.
American business people in Nagoya recently created the American Business
Community of Nagoya. This group is similar to the American Chamber of
Commerce in Japan (ACCJ) and seeks to provide self-help for U.S. firms doing
business in this region. To date, the group has nearly 30 members, and
representatives of such U.S. firms as General Dynamics, United Technologies,
and Coca-Cola. The U.S. Department of Commerce recently established a new
office in Nagoya to assist U.S. companies interested in investing in the
area and seeking possible business opportunities in the region.
Fukuoka and the Kyushu-Yamaguchi Region: The Kyushu-Yamaguchi region, lying
700 miles west of Tokyo, has a land area the size of Switzerland and an
economy 1.5 times that of the Netherlands and 2.6 times that of Taiwan.
Local business leaders call Kyushu Japan's "Silicon Island" because of the
semiconductor industry there which accounts for 42 percent of Japan's total
chip output. In addition, a recent movement of the Toyota group to Kyushu,
along with expansion by Nissan, will bring an estimated 10 percent of
Japan's car production to this island within the next five years.
Regional business and political leaders have sought to stimulate economic
growth through a wide variety of innovative development projects, including
high-technology research, waterfront redevelopment, and elaborate resort
projects. Public works projects in the Kyushu-Yamaguchi area will amount to
approximately $36 billion over the coming decade, and the Fukuoka area
resort projects are estimated to be worth $14 billion. Plans are being made
to obtain funding from the national government to start construction of a
major new international airport within the next ten years to serve as a new
hub for western Japan as well as for nearby Asian countries.
Particularly good business prospects in the Kyushu-Yamaguchi region may be
found in the areas of electronics and computers, architecture, design and
construction, and medical equipment and technology. Exhibitions and
seminars are organized by the U.S. Department of Commerce's Fukuoka office
in each of these areas during the course of the year.
Sapporo and Northern Japan: Northern Japan, consisting of Honshu's four
northeast prefectures and the island of Hokkaido, has a gross regional
product larger than $275 billion. This industry-centered region imports
heavily from other parts of Japan, but U.S. products can be extremely
competitive. The secondary and processing sectors need lower priced
American materials and services to survive. Establishing distribution in
this region is much cheaper than in Tokyo. Sapporo, in Hokkaido, lying 700
miles north of Tokyo, is also an important center of commercial activity.
The best sales prospects in northern Japan are home building materials,
major project construction and building materials, food processing machinery
and supplies, agricultural machinery and supplies, and tourism. Exporters
of coal, logs, wood pulp, processed lumber, fish, fish products, feed
grains, and all other agricultural inputs should pay particular attention to
the increasing demand for domestic product substitutes. Hokkaido is a good
test market for recreational and consumer goods and direct mail sales. The
U.S. Department of Commerce office in Sapporo can provide consultative and
facilitative services, temporary work space, simple office services, and
exhibition and seminar space in its display area for American products.
PROMINENT ECONOMIC ORGANIZATIONS IN JAPAN
The American Chamber of Commerce in Japan
Founded in 1948, the American Chamber of Commerce in Japan (ACCJ) has
actively sought to promote the development of commerce between the United
States and Japan. In order to do this, the ACCJ works with business and
government organizations in Japan and the United States to exchange ideas
and opinions and seek resolution of problems and issues affecting the
bilateral relationship. The ACCJ
performs two important functions for its members: (1) it apprises them of
the special problems they will confront while conducting business in Japan
and (2) where possible, assists them in solving those problems. Residing in
Japan is not a requirement for membership.
The ACCJ produces several excellent publications, including the recently
published Trade and Investment in Japan: The Current Environment. Besides
providing an evaluation of the current trade and investment environment in
Japan, this study also identifies the key success factors for those American
companies that have come to prosper in Japan, with the idea that others
could use these concepts and practices to guide future strategies for
Japanese market entry or expansion.
The ACCJ committee structure, through which information is gathered and
disseminated to all members, is the keystone to the ACCJ's operations. For
this reason, active participation in committee activities by ACCJ members is
highly encouraged. Current ACCJ committees exist on the following
subjects: China relations; direct marketing; employment practices; external
affairs; financial services; high technology; independent business; internal
affairs; investment in the United States; investments; licenses, patents,
and trademarks; living in Japan; marketing; membership relations;
nominating; programs; publications; public affairs policy; taxation and
legislation; trade expansion; and Washington relations/Asian-Pacific Council
of American Chambers of Commerce (APCAC). The ACCJ's address is:
The American Chamber of Commerce in Japan (ACCJ)
Fukide Building No. 2
4-1-21 Toranomon, Minato-ku, Tokyo 105, Japan
Phone: 011-81-3-3433-5381
Fax: 011-81-3-3436-1446
Keidanren
Keidanren (Federation of Economic Organizations) was established in 1946.
One of Japan's four main business organizations (the other three being
Nikkeiren, the Japan Committee for Economic Development, and the Japan
Chamber of Commerce and Industry), Keidanren is the most influential in
Japan's economy and industry.
Keidanren's principal functions are to adjust and mediate differences of
opinion among its various member industries and businesses, and to submit
proposals to the government regarding policies designed to stimulate the
economy. It also promotes international exchanges on business matters
between private citizens. To carry out these functions, Keidanren has a
number of permanent committees and consulting organizations, including
committees concerned with general policy, energy, economic cooperation, and
trade policy. It also has ad hoc committees on defense production and space
exploration.
Internationally, Keidanren conducts an active program of economic diplomacy
on a nongovernmental level through conferences with American and European
business leaders. As Keidanren is the spokesperson for big business in
Japan, its proposals and demands have exerted a strong influence in Japanese
political life. Its views are often sought by the Japanese Government and
its recommendations given important consideration. Keidanren's address is:
Keidanren
1-9-4 Otemachi
Chiyoda-ku, Tokyo 100 Japan
Phone: 011-81-3-3279-1441
Keizai Doyu Kai
The Japan Committee for Economic Development (Keizai Doyu Kai) is made up of
business managers and executives of various Japanese corporations. The
committee's purpose is to promote progress and stability in the Japanese
economy by making proposals aimed at benefiting the national economy as a
whole. It avoids taking stands on political issues.
At the time of its establishment in 1946, the committee was composed of
progressive business leaders and industrialists concerned with the problem
of reconstruction and democratizing the Japanese economy. It was intended
to provide an informal forum for developing and advancing new ideas.
Membership has grown to some 1,000 business persons. Various subcommittees
exist, which conduct research and issue recommendations under the guidance
of a board of 200 trustees. The committee has stressed the social
responsibility of business and promoted the cooperation of business and
academia. It also cooperates with similar organizations in other countries
and is particularly concerned with promoting the economic development of
Southeast Asia. Keizai Doyu Kai's address is:
Keizai Doyu Kai
1-4-6 Marunouchi
Chiyoda-ku, Tokyo 100 Japan
Phone: 011-81-3-3211-1271
JAPANESE TESTING, STANDARDS, AND CERTIFICATION
One of the most important areas of concern for your company is meeting the
requirements of Japanese testing, standards, and certification procedures
which cover a wide range of product sectors. Unfortunately, obtaining
information in these areas from outside of Japan is difficult. Japanese
approval procedures are often slow and cumbersome and can be discouraging to
those unwilling to make a major commitment of their time and energy.
However, significant progress has been made in specific product areas in the
last few years, and steps to simplify the system continue. Problems with
Japanese standards and certification systems generally have fallen into one
of three categories:
Lack of Transparency: Some of the committees that draft Japanese standards
have shown reluctance to allow foreign participation. As
a result, foreign firms whose products could be affected by new standards
have had no meaningful input into the development of those standards.
Furthermore, in many cases foreign firms do not learn the details of the new
standards until after Japanese firms represented on the committees have, and
thus the foreign firms lose critical lead time retooling to comply with the
new standards. This situation is beginning to improve as more drafting
standards committees are opened to participation by qualified foreigners.
Lack of Acceptance of Foreign Test Data: In the past, Japanese authorities
refused to accept the results of tests conducted by manufacturers or
independent U.S. test laboratories. Companies seeking certification had no
choice but to submit to testing and inspection by Japanese authorities,
exposing certain proprietary information. The Ministry of International
Trade and Industry (MITI) now accepts test results from U.S. testing
laboratories for certification of electrical appliances. A handful of U.S.
labs have received Japanese Government approval to inspect factories and
give type approval to U.S. products. MITI has designated the following U.S.
testing laboratories to certify products as meeting Japanese safety and
quality requirements:
DSET Laboratories, Inc. Applied Research Laboratories
Box 1850 of Florida, Inc.
Black Canyon Stage 1 5371 N.W. 161st Street
Phoenix, AZ 85029 Miami, FL 33014
Phone: (602) 465-7356 Phone: (305) 624-4800